Adobe snaps up e-commerce firm Magento as it aims to diversify

Adobe has acquired Magento, a California-based company that offers software to build and run online stores, and manage purchases, shipping and returns. It also helps digital retailers to sell their wares through social media ads. It competes directly with Shopify, whose shares fell as much as 5.5pc in extended trading following Adobe’s announcement.

The software behemoth hopes to integrate Magento’s commerce cloud into its own Experience Cloud to create a single platform serving both B2B and B2C customers around the world.

Magento has major clients

Users of Magento’s service include Canon and Rosetta Stone, among others. According to Bloomberg, Magento supports in excess of $155bn in gross merchandise volume.

At present, Magento comes in two separate streams: the first is an open source version, which can be customised and built on by developers; and the second is a paid commerce version with added features, from staging tools and managed cloud hosting to taking care of loyalty programmes.

Adobe is one of the world’s largest software companies and it has made efforts in recent years to diversify from the digital media products it is best known for.

Fierce competition

With this latest deal, the company is ramping up efforts to rival cloud-based commerce services from big names such as Oracle and Salesforce. The company recently announced an $8bn share buyback programme – which is expected to be funded from its future operational cash flow – through to the fiscal year 2021.

The Magento deal is set to wrap up in the third quarter of Adobe’s fiscal year, pending approval from regulators. Magento CEO Mark Lavelle said: “Adobe and Magento share a vision for the future of digital experiences that brings together Adobe’s strength in content and data with Magento’s open commerce innovation. We’re excited to join Adobe and believe this will be a great opportunity for our customers, partners and developer community.”

CRM expert Brent Leary told TechCrunch that the deal closes a major gap in Adobe’s Experience Cloud: “Now, they have an offering that allows them to close the loop with consumers, who are able to finalise a digital transaction that started online with digital marketing tools Adobe already offered.”

Magento was previously acquired in 2011 by eBay, but went private again in 2015 with help from private equity firm Permira Funds. At the time that eBay purchased the then three-year-old company, the deal was worth a mere $180m.